1) There is little to no daylight between DFSCX and DFSVX since they have both existed. One is SCV and the other SCB. The lack of real difference between them is important information in determining whether value actually provides a premium over blend in the SC space. How could this not be the case? Are you disputing that one is SCB and the other SCV?vineviz wrote: ↑Sat Jul 13, 2019 3:00 pmSo many problems here:
1) His post provided no evidence that is relevant to the ability of "factor models" to "predict the return of these funds.
2) Factor models are not supposed to "predict" future unconditional returns of live funds, so an ability or inability to do so is beside the point.
3) Factor models are designed to explain the performance of assets, which is something they do quite well.
4) His post provided no evidence that would support or refute a claim that the value or size "premium did not show up".
5) Both size and value were definitely "investable" for more than 36 years. Indeed, it was the observed real (out)performance of such investments that necessitated the formation of multifactor asset pricing models to begin with.
2) This is a fair criticism of my post. The academic model only posited to explain past results not predict future ones. However, factor investing advocates do predict or at least expect premiums going forward. It is why DFA makes and markets these funds to begin with. It is why investors buy them, they are taking on the additional risk with the hope of being rewarded with a premium.
3) For the period prior to publication with a long/short definition of those factors yes, I would agree.
4) DFA's SCV fund did not provide a premium over its SCB fund. No premium for going SCV vs SCB since 1993 when the SCV fund was launched. DFA's small cap fund (they even call it a 'micro cap') did not outperform the Vanguard S&P 500 index fund since 1981 when it launched 38 years ago. Where was the premium for small over large/TSM, and where is the premium of SCV over SCB? They are not there over the entire period those funds existed. What we see is some periods where one fund is outperforming the other, but ultimately a similar total return for 38 years. Or you might say, reversion to the mean....which was the title of JoMoney's post.
5) If you can point me to the factor funds that existed prior to 1981 I would be grateful. The closest I am aware of is something like this:viewtopic.php?f=10&t=283742